According to recent survey’s statics conducted by the Aviva (the UK´s largest insurer), more than 44% Britons have been running small and medium businesses. Whilst some entrepreneurs are engaging in out-of-work activities to augment their salary, others have used redundancy and poor employment prospects as a springboard to start their own business.
But starting a business is not easy if you cannot generate enough investment to expand, but thanks to Government incentives in the shape of enterprise investment schemes, new small business owners have a real chance of laying the foundation on which their business can grow.
The British Government runs several investment schemes that provide money to small business. The most advantageous is the Enterprise Investment Scheme (EIS) which is designed to support small businesses so they can generate sufficient funds to grow and ultimately contribute to the country’s GDP and create more employment opportunities.
How does the Enterprise Investment Scheme work?
Small businesses receive money from the investors in exchange for shares in their business. It’s a win-win scheme for both the investors and the small business owner as the entrepreneur gets the required finance and the investors reap the benefits of tax reliefs offered by HMRC. A few important things to note about this scheme are:
- This scheme is only available for the trading companies
- Entrepreneurs can get financial investments of up to £1 million each for the exchange of their business shares
- Investors, on the other hand, can enjoy the tax cuts up to 30%
- This subscription can also be passed back by the investors to get tax reliefs in the previous year
- Keeping the company’s shares for the time span of at least three years, can exempt the investors from paying the capital gains tax on the capital gains
- Rolling over capital gain is another benefit of this scheme
- If one is directly linked to the company then they cannot get these benefits
Criteria to qualify for EIS
If you are interested in applying for an EIS run through this checklist to determine whether you are eligible.
- Company should be unquoted, which is carrying out the trading business
- Holding a company that is part of any trading group
- Share should be unquoted i.e. not controlled by the another company or facing any kind of crisis
- Company’s assets should not be more than £15 million before the issuance of EIS shares and £16 million immediately issue
- At the of shares issue, company should have less than 250 full time employees on its payroll
- Company should not be raising more than 5 million, annually, through any of the ‘risk capital’ schemes
If you would like to know more about how your small business can benefit from EIS, or if you are thinking about investing in a small business and want to know the tax implications involved contact the experts, accountants in London, at by calling at 08000 235 234 or dropping us an email email@example.com